As a 1099 self employed salesperson, can I deduct my monthly health insurance payments for myself and family if my insurance is through a health insurance co-op?

[thekeithklan]

The co-op plan is through Christian Healthcare Ministries

[TaxGuyBill · Accepted solution]

No, a Healthcare Sharing Ministry is not considered health insurance for purposes of your income taxes.  Sorry.

[drock]

Yes you can deduct  your insurance payments through a health insurance co-op if it is in the U.S. Patient Protection and Affordable Care Act (the PPACA, more commonly known as Obamacare) as an acceptable option to meet the law's individual mandate for health cost coverage.

[dmertz]

This does not answer the question that was asked.  The question asked if a healthcare sharing program qualifies as insurance for the purpose of a self-employed health insurance deduction or a medical deduction.  It does not.

[TaxGuyBill]

A Healthcare Sharing Ministry is an exception to the penalty for having health insurance.  However, it is NOT actually considered health insurance, and is not deductible as a Medical Expense.

[drock]

You are right, these health sharing ministries are in compliance with the Patient Protection and Affordable Care Act, under section 1311(d)(4)(H), meaning that they comply with following mandates
1. doesn't reject new members if they have a health condition
2. doesn't increase rates on members who suffer a costly illness
3. doesn't "cancel" anyone's membership because of a costly health condition
4. doesn't set rates based on a member's age, health status, or geographic location
5. has programs to help members with costs for pre-existing conditions
6. has a catastrophic illness cost sharing program that assists members with health care costs over $125,000
7. meets each of the qualifications set forth for health cost sharing ministries in the U.S. health care legislation.
With this compliance, these health sharing plans are exempt from having their members pay a penalty for not having insurance from the gov. marketplace in that given year. There is nothing said in the IRS publications that exempts members of these ministries from deducting their health sharing payments as a self employed health insurance deduction. Unless the IRS defines what the term health insurance is and by so doing exempts these health sharing organizations from qualifying for the self employed health insurance deduction, which I have found no such publication, then it is up to an interpretation. So I would say it is your choice, wether or not you think that a health sharing plan from these ministries is or is not defined by the IRS as health insurance.

[dmertz]

There is nothing in the law that *permits* these payments to be deducted because these are not payments for insurance.  The law does explicitly permit payments for *insurance* to be deducted.

[drock]

There is nothing in the law that excludes these payments from being deducted. No such language exist.

[drock]

@dmertz because these organizations comply with the the Patient Protection and Affordable Care Act, under section 1311(d)(4)(H), members of these organizations are not penalized for not having "health insurance," and with that compliance the same self-employment health insurance deduction is permitted to those members.

[dmertz]

The relevant section of the tax code, § 162(l), permits a deduction for insurance.  It does not permit this deduction for anything that is not insurance.

Being exempt from penalty under section 1311(d)(4)(H) does not create a legal fiction that members of a health care sharing ministry have insurance.  In fact, it does the opposite.  By defining a penalty exemption for members of a health care sharing ministry, it implies that the payments to a health care sharing ministry are *not* payments for insurance.  If it instead created a legal fiction that payments to a health care sharing ministry were payments for insurance, there would be no need for this penalty exemption.

[drock]

@dmertz After more research this is what I have concluded. The relevant section of the tax code, § 162(l), permits a deduction for qualified health plans. Some Health Share Ministries comply with the Patient Protection and Affordable Care Act, under section 1311(d)(4)(H), which states that their members are exempt from having to pay a penalty for not having a qualified plan, but it seems that Health Share Ministries do not provide qualified plans as describe in § 18021(a). So my conclusion, unfortunately, is that health share ministry donations do not qualify as self-employed health insurance deductions. I am going to email one to make sure that my conclusion is correct.

[drock]

Health care ministry members are exempt from the Requirement to maintain a minimum essential coverage under Code § 5000A(d)(B)(i). This exemption excuses these members from having to pay a penalty.

§ 1.162(I)-1 allows a deduction under 162(I) for specified premiums namely, an amount equal to the amount paid during the taxable year for insurance which constitutes medical care. Specified premiums for medical care are defined as premiums for a specified qualified health plan or plans for which the taxpayer may otherwise claim a deduction under section 162(I).

A qualified health plan means a health plan that –

1. Has in effect a certification that such plan meets the criteria for certification described in section 19031(c)
2. Provides the essential health benefits package described in section 18022(a)

and a whole bunch of other things that I don’t think health sharing plans have. And that is why health sharing plans do not claim themselves as health insurance. So yeah, you are right, you can't take the premium deduction unfortunately. 

[imjamesdavis]

Right. But, could you deduct it as a business expense? It's not insurance, but it is an employee perk, right? 

[dmertz]

The original question asked about this with respect to a self-employed individual and in that case it's not a business expense,  If you are asking in regard to the business's employees other than the self-employed business owner, these payments would have to be included on the employees' Forms W-2 as supplemental wages subject to FICA.  The supplemental wages and employer portion of the FICA would be deductible business expenses but the supplemental wages would be includible as income on the employees' tax returns.